Contract talks are set to start soon between the nickel division and more than 3,200 production and maintenance workers represented by Local 6500 of the United Steelworkers of America. The current three-year contract expires May 31.

As well, in May, there will be a production shutdown of the Greater Sudbury operations, allowing for much-needed repairs and maintenance work to be carried out.

On March 2, Vale Inco announced it was laying off 261 of its Greater Sudbury employees.

The announcement was the latest in a series of cost-cutting measures the nickel division has undertaken in recent months.

In late 2008, Vale Inco decided it would put its most costly Greater Sudbury mine, Copper Cliff South, in care and control mode.

The Copper Cliff South Mine shutdown will result in a production cut of 8,000 metric tonnes of finished nickel a year.

When the closure was announced, the mine's 365 employees were to be transferred to other local operations. The figure consisted of 287 production and maintenance workers and 78 staff (unionized and management).

With Copper Cliff South Mine on standby mode, that leaves Vale Inco with six operating mines: Garson, Garson Ramp, Stobie, Creighton, Copper Cliff North and Coleman/ McCreedy West. The Totten Mine development project will continue as planned.

Vale Inco's Voisey' s Bay operations in Labrador, meanwhile, will be shut down for the entire month of July. The Ovoid Mine and processing mill produce nickel and copper concentrates. In the first nine months of 2008, the mine and mill contributed to the production of 58,000 metric tonnes of finished nickel and 39,000 metric tonnes of copper in concentrate.

In addition to production cutbacks, Vale Inco also decided to postpone the start up of the development of the Copper Cliff Deep project for a period of one year. The project carries a price tag of $814 million U. S., of which $138 million U. S. was to be spent in 2009.

Copper Cliff Deep involves the replacement of the current shafts in the Copper Cliff North and South Mines with one single shaft.

Vale Inco also launched a voluntary early-retirement program for 350 eligible staff employees across the globe.

A hiring freeze, reduction and elimination of contractors, and a reduction in overtime were also initiated. Vale Inco ultimately had to pull its early-retirement offer back due to a better-than-expected response.

Nickel analyst Terry Ortslan of TSO & Associates in Montreal said the coming contract talks between Local 6500 and Vale Inco will be interesting to watch.

"In the last one (contract), they (union) had a realistic contract given the economic circumstances," he said.

"Now, look for renegotiation with things like contract language and monetary issues.

"I'm not sure labour is prepared to accept that for the next three years."

Ortslan would not be surprised to see a deal not reached by May 31, when the current contract expires. Yet, he can see strike action held off if progress is being made at the bargaining table.

"It's not a question of a strike, but a question of negotiations," he said.

"I don't think it's going to be done May 31st."

In late January, Vale Inco's parent company, Vale, announced it was going full steam ahead with plans to spend $14 billion in 2009.

"There are many fundamental factors in the economy that mitigate in favour of a quick recovery," Roger Agnelli, Vale's chief executive officer, told reporters in Brasilia, about the capital spending announcement.

The $14 billion in spending is up from the record $10 billion Vale spent in 2008. Agnelli said the spending will go to increasing output and shipments of iron ore, coal, nickel and other metals in anticipation of a rebound in demand.

"In a moment of crisis, the company that has the wherewithal and the cash needs to invest," Agnelli told reporters. "We are positive about the future.

"I can't say yet if the worst is past, but the first adjustment has happened."

Only a very "important" change in market conditions, added Agnelli, would see the company hit the brakes with its 2009 capital spending plans.

The announcement, however, came on the heels of a 20 per cent-plus iron ore output cut Vale enacted in December due to a sharp drop in demand.

In 2008, Vale also let go 1,300 of its 62,000 employees and put at least 5,500 on temporary paid leave to reduce costs.